Ten Car Derailment Affects Coal Of Africa Mines

On 28 February, Coal of Africa (CZA.L) declared force majeure on its export sales following the derailment of 10 railcars at the Maputo rail corridor. As a result, all traffic between Komatipoort and Maputo was suspended for at least seven weeks. This blow comes just a few weeks after the company suffered flooding at the Vele mine. Both events will have a pronounced impact on the company’s financial performance in H213, unless it manages to adjust its production and redirect at least some of its export supplies to the domestic market.

CZA.L declared force majeure on its export supplies following the derailment of 10 rail wagons on the Maputo rail corridor (CoAL’s main export route) on 18 February 2013. This accident has resulted in all rail traffic between Komatipoort and Maputo being suspended. According to Transnet Freight Rail (TFR), this suspension will last for at least seven weeks. All attempts by TFR to establish the alternative transportation routes have failed. CoAL reported that production at the mines will continue with the saleable coal being stockpiled until the available capacity is exhausted. However, all operations at Vele were already suspended as full inventory levels were reached. The company intends to restart operations immediately after the rail suspension is lifted.

While the force majeure notices were issued at all CoAL’s operations, we understand the rail suspension will only affect exports, while the domestic sales should continue as normal. In addition, the company may be able to redirect some of its export supplies to the local market, thereby somewhat mitigating the pronounced operational and financial impact. In Q213, c 50% of CoAL’s sales was exported. We will revise our forecasts following the release of H113 financials in March.

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